x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31,
2012

¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________
to ___________________

Commission File Number 000-54365

BRAINSTORM CELL THERAPEUTICS INC.

(Exact name of registrant as specified in
its charter)

Delaware

20-8133057

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

605 Third Avenue, 34th Floor

New York, NY 10158

(Address of principal executive offices)

(646) 666-3188

(Registrant's telephone number, including
area code)

Not Applicable

(Former name, former address and former
fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No ¨

Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer ¨ (Do
not check if a smaller reporting company)

Smaller reporting company x

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 7, 2012, the number of shares outstanding of the registrant’s
common stock, $0.00005 par value per share, was 128,586,644.

TABLE OF CONTENTS

Page Number

PART I

Item 1. Financial Statements

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

37

Item 3. Quantitative and Qualitative Disclosures About Market Risk

41

Item 4. Controls and Procedures

42

PART II

Item 1. Legal Proceedings

42

Item 1A. Risk Factors

43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

43

Item 5. Other Information

43

Item 6. Exhibits

43

2

PART I: FINANCIAL INFORMATION

SPECIAL NOTE

Unless otherwise specified in this quarterly report on Form
10-Q, all references to currency, monetary values and dollars set forth herein shall mean United States (U.S.) dollars.

Item 1. Financial Statements.

3

BRAINSTORM CELL THERAPEUTICS
INC. AND SUBSIDIARY

(A development stage
company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

UNAUDITED

U.S. DOLLARS IN
THOUSANDS

4

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2012

UNAUDITED

U.S. DOLLARS IN THOUSANDS

INDEX

Page

Consolidated Balance Sheets

6

Consolidated Statements of Operations

7

Statements of Changes in Stockholders' Equity (Deficiency)

8 – 16

Consolidated Statements of Cash Flows

17

Notes to Consolidated Financial Statements

18 - 36

5

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

CONSOLIDATED BALANCE
SHEETS

U.S. dollars in thousands

(Except share data)

March 31,

December 31,

2012

2011

Unaudited

Audited

ASSETS

Current Assets:

Cash and cash equivalents

1,145

1,923

Account receivable

482

312

Prepaid expenses

148

69

Total current assets

1,775

2,304

Long-Term Investments:

Prepaid expenses

17

17

Severance payment fund

129

109

Total long-term investments

146

126

Property and Equipment, Net

328

314

Total assets

2,249

2,744

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:

Trade payables

325

244

Accrued expenses

839

750

Other accounts payable

126

141

Total current liabilities

1,290

1,135

Accrued Severance Pay

142

121

Total liabilities

1,432

1,256

Commitments And Contingencies Stockholders' Equity:

Stock capital: (Note 8)

6

6

Common stock of $0.00005 par value - Authorized: 800,000,000 shares at March 31, 2012 and December 31, 2011; Issued and outstanding: 126,737,158 and 126,444,309 shares at March 31, 2012 and December 31, 2011 respectively.

Additional paid-in-capital

45,761

45,560

Deficit accumulated during the development stage

(44,950

)

(44,078

)

Total stockholders' equity

817

1,488

Total liabilities and stockholders' equity

2,249

2,744

The accompanying notes are an integral
part of the consolidated financial statements.

6

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

CONSOLIDATED STATEMENTS OF OPERATIONS

U.S.
dollars in thousands

(Except
share data)

Three months

Period from September 22, 2000 (inception date) through

ended March 31

March 31,

2012

2011

2012 (*)

Unaudited

Unaudited

Operating costs and expenses:

Research and development, net

369

270

24,788

General and administrative

510

258

17,513

Total operating costs and expenses

879

528

42,301

Financial expenses (income), net

(11

)

177

2,536

Other income

-

-

(132

)

Operating loss

868

705

44,705

Taxes on income

4

-

81

Loss from continuing operations

872

705

44,786

Net loss from discontinued operations

-

-

164

Net loss

872

705

44,950

Basic and diluted net loss per share from continuing operations

0.01

0.01

Weighted average number of shares outstanding used in computing basic and diluted net loss per share

126,591,262

108,895,199

(*)
Out of which, $163, relating to the period from inception to March 31 2004, is unaudited.

The accompanying notes are an integral
part of the consolidated financial statements

7

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S.
dollars in thousands

(except
share data)

Deficit accumulated

Total

Common stock

Additional paid-in

Deferred Stock - based

during the development

stockholders'
equity

Number

Amount

capital

compensation

stage

(deficiency)

Balance as of September 22, 2000 (date of inception) (unaudited)

-

$

-

$

-

$

-

$

-

$

-

Stock issued on September 22, 2000 for cash at $0.00188 per share

8,500,000

1

16

-

-

17

Stock issued on March 31, 2001 for cash at $0.0375 per share

1,600,000

* -

60

-

-

60

Contribution of capital

-

-

8

-

-

8

Net loss

-

-

-

-

(17

)

(17

)

Balance as of March 31, 2001 (unaudited)

10,100,000

1

84

-

(17

)

68

Contribution of capital

-

-

11

-

-

11

Net loss

-

-

-

-

(26

)

(26

)

Balance as of March 31, 2002 (unaudited)

10,100,000

1

95

-

(43

)

53

Contribution of capital

-

-

15

-

-

15

Net loss

-

-

-

-

(47

)

(47

)

Balance as of March 31, 2003 (unaudited)

10,100,000

1

110

-

(90

)

21

2-for-1 stock split

10,100,000

* -

-

-

-

-

Stock issued on August 31, 2003 to purchase mineral option at $0.065 per share

100,000

* -

6

-

-

6

Cancellation of shares granted to Company's President

(10,062,000

)

* -

* -

-

-

-

Contribution of capital

-

* -

15

-

-

15

Net loss

-

-

-

-

(73

)

(73

)

Balance as of March 31, 2004 (unaudited)

10,238,000

$

1

$

131

$

-

$

(163

)

$

(31

)

* Represents an amount less than $1.

The accompanying notes are an integral
part of the consolidated financial statements

8

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S.
dollars in thousands

(Except
share data)

Deficit accumulated

Total

Common stock

Additional paid-in

Deferred Stock - based

during the development

stockholders'
equity

Number

Amount

capital

compensation

stage

(deficiency)

Balance as of March 31, 2004

10,238,000

$

1

$

131

$

-

$

(163

)

$

(31

)

Stock issued on June 24, 2004 for private placement at $0.01 per share, net of $25,000 issuance expenses

The accompanying notes are an integral
part of the consolidated financial statements.

15

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

U.S. dollars in thousands

(except share data)

Deficit

accumulated

Total

Common stock

Additional
paid-in

Deferred
Stock - based

during the
development

stockholders'
equity

Number

Amount

capital

compensation

stage

(deficiency)

Balance as of December 31, 2011

126,444,309

$

6

$

45,560

$

-

$

(44,078

)

$

1,488

Stock-based compensation
related to options and stock granted to service providers

-

4

-

-

4

Stock-based compensation
related to stock and options granted to directors and employees

-

177

-

-

177

Exercise of options

167,849

-

20

-

-

20

Exercise of warrants

125,000

-

(*

)

-

-

(*

)

Net loss

-

-

-

-

(872

)

(872

)

Balance as of March 31,
2012

126,737,158

$

6

$

45,761

$

-

$

(44,950

)

$

817

* Represents an amount less than $1.

The accompanying notes are an integral
part of the consolidated financial statements.

16

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

(except share data)

Period from

September 22, 2000

Three months

(inception date)

ended March 31

through March 31,

2012

2011

2012 (*)

Unaudited

Unaudited

Cash flows from operating activities:

Net loss

(872

)

(705

)

(44,950

)

Less - loss for the period from discontinued operations

-

-

164

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization of deferred charges

38

38

1,039

Severance pay, net

1

(8

)

13

Accrued interest on loans

-

-

451

Amortization of discount on short-term loans

-

-

1,864

Change in fair value of options and warrants

-

-

(795

)

Expenses related to shares and options granted to service providers

4

(20

)

21,490

Stock-based compensation related to options granted to employees

177

27

6,998

Decrease (increase) in accounts receivable and prepaid expenses

(249

)

265

(630

)

Increase in trade payables and convertible note

81

94

798

Increase in other accounts payable and accrued expenses

74

254

1,471

Erosion of restricted cash

-

-

(6

)

Net cash used in continuing operating activities

(746

)

(55

)

(12,093

)

Net cash used in discontinued operating activities

-

-

(23

)

Total net cash used in operating activities

(746

)

(55

)

(12,116

)

Cash flows from investing activities:

Purchase of property and equipment

(52

)

(37

)

(1,185

)

Restricted cash

-

-

6

Investment in lease deposit

-

1

(17

)

Net cash used in continuing investing activities

(52

)

(36

)

(1,196

)

Net cash used in discontinued investing activities

-

-

(16

)

Total net cash used in investing activities

(52

)

(36

)

(1,212

)

Cash flows from financing activities:

Proceeds from issuance of Common stock, net

-

3,607

12,319

Proceeds from loans, notes and issuance of warrants, net

-

-

2,061

Proceeds from exercise of warrants and options

20

55

651

Repayment of short-term loans

-

-

(601

)

Net cash provided by continuing financing activities

20

3,662

14,430

Net cash provided by discontinued financing activities

-

-

43

Total net cash provided by financing activities

20

3,662

14,473

Increase (decrease) in cash and cash equivalents

(778

)

3,571

1,145

Cash and cash equivalents at the beginning of the period

1,923

93

-

Cash and cash equivalents at end of the period

1,145

3,664

1,145

Non-cash financing activities:

Conversion of convertible loan and convertible note to shares Conversion of a debt to a trade payable to Common Stock $ 84

-

137

Conversion of other accounts payable to Common Stock

-

24

(*) Out of the
which, cash flows used in discontinued operating activities of $36, cash flows used in discontinued investing
activities of $16 and cash flows provided in discontinued financing activities of $57, relating to the
period from inception to March 31, 2004, is unaudited.

The accompanying notes are an integral
part of the consolidated financial statements.

17

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 1 -

GENERAL

A.

Brainstorm
Cell Therapeutics Inc. (formerly: Golden Hand Resources Inc.)
(the "Company") was incorporated in the State of Washington
on September 22, 2000.

B.

On
May 21, 2004, the former major stockholders of the Company entered
into a purchase agreement with a group of private investors,
who purchased from the former major stockholders 6,880,000 shares
of the then issued and outstanding 10,238,000 shares of Common
Stock.

C.

On
July 8, 2004, the Company entered into a licensing agreement
with Ramot of Tel Aviv University Ltd. ("Ramot"), to
acquire certain stem cell technology (see Note 4). Subsequent
to this agreement, the Company decided to focus on the development
of novel cell therapies for neurodegenerative diseases based
on the acquired technology and research to be conducted and funded
by the Company.

Following
the licensing agreement dated July 8, 2004, the management of the Company decided to abandon all old activities related to the
sale of the digital data recorder product. The discontinuation of this activity was accounted for under the provision of Statement
of Financial Accounting Standard ASC 360-10 (formerly "SFAS" 144), "Accounting for the Impairment or Disposal of
Long-Lived Assets".

D.

On
October 25, 2004, the Company formed a wholly-owned subsidiary
in Israel, Brainstorm Cell Therapeutics Ltd. ("BCT").

E.

On
November 22, 2004, the Company changed its name from Golden Hand
Resources Inc. to Brainstorm Cell Therapeutics Inc. to better
reflect its new line of business in the development of novel
cell therapies for neurodegenerative diseases. BCT, as defined
below, owns all operational property and equipment.

F.

On
September 17, 2006, the Company changed the Company's fiscal
year-end from March 31 to December 31.

G.

In
December 2006, the Company changed its state of incorporation
from Washington to Delaware.

H.

Since
its inception, the Company has devoted substantially all of its
efforts to research and development, recruiting management and
technical staff, acquiring assets and raising capital. In addition,
the Company has not generated revenues. Accordingly, the Company
is considered to be in the development stage, as defined in Statement
of Financial Accounting Standards No. 7, "Accounting and
reporting by development Stage Enterprises" ASC 915-10 (formerly
"SFAS No. 7").

I.

In
October 2010, the Israeli Ministry of Health (“MOH”)
granted clearance for a Phase I/II clinical trial using the Company’s
autologous NurOwn™ stem cell therapy in patients with amyotrophic
lateral sclerosis (“ALS”),
subject to some additional process specifications as well as
completion of the sterility validation study for tests performed.

On
February 23, 2011, the Company submitted to the MOH all the required documents. Following approval of the MOH, a Phase I/II clinical
study for ALS patients using the Company’s autologous NurOwn™ stem cell therapy (the “Clinical Trial”)
was initiated in June 2011.

In
January 2012, the Company reported on an interim safety follow-up of the first 4 patients enrolled in its Clinical Trial indicating
that no significant treatment-related adverse events were reported. The NurOwn™ treatment has thus so far proven to be safe,
and has shown some initial indications of beneficial clinical effects.

J.

In February
2011, the U.S. Food and Drug Administration
(“FDA”) granted orphan drug
designation to the Company’s NurOwn™
autologous adult stem cell product candidate
for the treatment of ALS.

18

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 1 -

GENERAL (Cont.)

GOING
CONCERN

As reflected in the accompanying
financial statements, the Company’s operations for the three months ended March 31, 2012, resulted in a net loss of $872.
The Company’s balance sheet reflects an accumulated deficit of $44,950. These conditions, together with the fact that the
Company is a development stage Company and has no revenues nor are revenues expected in the near future, raise substantial doubt
about the Company's ability to continue to operate as a going concern. The Company’s ability to continue operating as a
“going concern” is dependent on several factors, among them is its ability to raise sufficient additional working
capital.

In 2009, the Company decided
to focus only on the effort to commence clinical trials for ALS and such trials did commence in 2011.

In February 2011, the Company
raised approximately $3.8 million from institutional and private investors. However, there can be no assurance that additional
funds will be available on terms acceptable to the Company, or at all.

These financial statements
do not include any adjustments relating to the recoverability and classification of assets, carrying amounts or the amount and
classification of liabilities that may be required should the Company be unable to continue as a going concern.

NOTE 2 -

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting
policies applied in the annual financial statements of the Company as of December 31, 2011 are applied consistently in these financial
statements.

NOTE 3 -

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The accompanying
unaudited interim financial statements have been prepared in a condensed format and include the consolidated financial operations
of the Company and its wholly-owned subsidiary as of March 31, 2012 and for the three months then ended, in accordance with accounting
principles generally accepted in the United States relating to the preparation of financial statements for interim periods. Accordingly,
they do not include all the information and footnotes required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three months ended March 31, 2012, are not necessarily indicative
of the results that may be expected for the year ended December 31, 2012.

NOTE 4 -

RESEARCH AND LICENSE AGREEMENT

The
Company has a Research and License Agreement, as amended and restated, with Ramot. The Company obtained a waiver and release from
Ramot pursuant to which Ramot agreed to an amended payment schedule regarding the Company's payment obligations under the Research
and License Agreement and waived all claims against the Company resulting from the Company's previous defaults and non-payment
under the Research and License Agreement. The waiver and release amended and restated the original payment schedule under the
original agreement providing for payments during the initial research period and additional payments for any extended research
period.

19

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 4 -

RESEARCH AND LICENSE AGREEMENT (Cont.)

As
of December 24, 2009, the Company had paid to Ramot $400 but did not make payments totaling $240 for the initial research period
and payments totaling $380 for the extended research period.

On
December 24, 2009, the Company and Ramot entered into a settlement agreement which amended the Research and License Agreement,
as amended and restated pursuant to which, among other things, the following matters were agreed upon:

a)

Ramot
released the Company
from its obligation
to fund the extended
research period in the
total amount of $1,140.
Therefore, the Company
deleted an amount in
2009, equal to $760
from it research and
development expenses
that were previously
expensed.

b)

Past
due amounts of $240
for the initial research
period plus interest
of $32 owed by the Company
to Ramot was converted
into 1,120,000 shares
of common stock on December
30, 2009. Ramot was
required to deposit
the shares with a broker
and only sell the shares
in the open market after
185 days from the issuance
date.

c)

In
the event that the total
proceeds generated by
sales of the shares
on December 31, 2010,
together with the March
31, 2010 payment, are
less than $240 on or
prior to December 31,
2010, then on such date
the Company shall pay
to Ramot the difference
between the proceeds
that Ramot has received
from sales of the shares
up to such date together
with the September Payment
(if any) that has been
transferred to Ramot
up to such date, and
$240. Related compensation
in the amount of $51
was recorded as research
and development expenses.

In
January 2011 Ramot exercised additional 167,530 Common Stock of the Company, for $35, which finalized the sale of the 1,120,000
Common Stock of the Company granted to Ramot for $235. In February 2011 the Company paid the remaining $5 and finalized the balance
due to Ramot according to the settlement agreement between the parties dated December 24, 2009.

NOTE 5 -

CONSULTING AGREEMENTS

A.

On
July 8, 2004, the Company entered into two consulting agreements
with Prof. Eldad Melamed and Dr. Daniel Offen (together, the
"Consultants"), under which the Consultants provide
the Company scientific and medical consulting services in consideration
for a monthly payment of $6 each. In addition, the Company granted
each of the Consultants, a fully vested warrant to purchase 1,097,215
shares of Common Stock at an exercise price of $0.01 per share.
The warrants issued pursuant to the agreement were issued to
the Consultants effective as of November 4, 2004. Each of the
warrants is exercisable for a seven-year period beginning on
November 4, 2005. As of September 2010, all the above warrants
had been exercised.

B.

On December 16, 2010, the
Company approved a grant of 1,100,000 shares of the Company's
Common Stock to the two Consultants, for services rendered
through December 31, 2010. Related compensation in the amount
of $220 was recorded as research and development expense.
A sum of $487 was cancelled concurrently with the issuance
of the 1,100,000 shares of Common Stock of the Company.

C.

On June 27, 2011, the
Company approved an additional grant of 400,000shares of the Company's Common Stock
to Prof. Daniel Offen, for services rendered through December 31, 2009. Related compensation in the amount of $192 is recorded
as research and development expense.

D.

As
of March 31, 2012, the Company has a total obligation of $135
for services rendered by the Consultants under the abovementioned
agreements.

20

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 6 -

SHORT-TERM CONVERTIBLE NOTE

On December 13, 2009, the Company
issued a $135 Convertible Promissory Note to its legal advisor for $217 in legal fees accrued through October 31, 2009. Interest
on the Note accrued at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal
and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion
election.

The gap between the amount
the Company owed to the legal advisor and the principal of the Convertible Promissory Note in the amount of $82 was deducted from
general and administrative expenses.

On February 19, 2010, the Company's
legal advisor converted the entire accrued principal and interest of $135 Convertible Promissory Note into 402,385 shares of Common
Stock.

On September 15, 2010, the
Company issued a $135 Convertible Promissory Note to its legal advisor for legal fees accrued through December 31, 2010. Interest
on the Note was at the rate of 4%. The legal advisor has the right at any time to convert all or part of the outstanding principal
and interest amount of the note into shares of Common Stock based on the five day average closing stock price prior to conversion
election.

On February 18, 2011, the legal
advisor converted the entire accrued principal and interest into 445,617 shares of Common Stock.

NOTE 7 -

SHORT-TERM LOANS

In March 2007, the Company
issued a $150 convertible note to a lender, with an annual interest rate of 8% for the first year, with an increase up to 10%
after the first year. On January 27, 2010, the lender converted the entire accrued principal and interest of $189 into 1,016,109
shares of Common Stock of the Company. In July 2011, the Company issued to the lender an additional 309,977 shares of Common Stock
of the Company with regard to the above conversion.

Since the outcome of the issuance
of the shares was to relieve the debtor from its obligation, based on guidance in ASC 860-10 (formerly FASB No 140) and ASC 450-20
Extinguishment of Liabilities” the Company derecognized the liability with the difference recognized in earnings.

NOTE 8 -

STOCK CAPITAL

A.

The rights of Common Stock are
as follows:

Holders
of Common Stock have the right to receive notice to participate and vote in general meetings of the Company, the right to a share
in the excess of assets upon liquidation of the Company and the right to receive dividends, if declared.

The Common
Stock is registered and publicly traded on the Over-the-Counter Bulletin Board service of the National Association of Securities
Dealers, Inc. under the symbol BCLI.

21

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares warrants and
options:

1.

Private placements:

a)

On
June 24, 2004, the Company issued to investors 8,510,000 shares
of Common Stock for total proceeds of $60 (net of $25 issuance
expenses).

b)

On
February 23, 2005, the Company completed a private placement
for sale of 1,894,808 units for total proceeds of $1,418. Each
unit consists of one share of Common Stock and a three-year
warrant to purchase one share of Common Stock at $2.50 per share.
This private placement was consummated in three tranches which
closed in October 2004, November 2004 and February 2005.

c)

On
May 12, 2005, the Company issued to an investor 186,875 shares
of Common Stock at a price of $0.8 per share for total proceeds
of $149.

d)

On
July 27, 2005, the Company issued to investors 165,000 shares
of Common Stock at a price of $0.6 per share for total proceeds
of $99.

e)

On
August 11, 2005, the Company signed a private placement agreement
with investors for the sale of up to 1,250,000 units at a price
of $0.8 per unit. Each unit consists of one share of Common
Stock and one warrant to purchase one share of Common Stock
at $1.00 per share. The warrants are exercisable for a period
of three years from issuance. On March 31, 2005, the Company
sold 312,500 units for total net proceeds of $225. On December
7, 2005, the Company sold 187,500 units for total net proceeds
of $135.

f)

On
July 2, 2007, the Company entered into an investment agreement,
pursuant to which the Company agreed to sell up to 27,500,000
shares of Common Stock, for an aggregate subscription price
of up to $5 million and warrants to purchase up to 30,250,000
shares of Common Stock. Separate closings of the purchase and
sale of the shares and the warrants were originally scheduled
to take place as follows:

Purchase date

Purchase price

Number of subscription shares

Number of warrant shares

August 30, 2007

$

1,250 (includes $250 paid as a convertible loan)

6,875,000

7,562,500

November 15, 2007

$

750

4,125,000

4,537,500

February 15, 2008

$

750

4,125,000

4,537,500

May 15, 2008

$

750

4,125,000

4,537,500

July 30, 2008

$

750

4,125,000

4,537,500

November 15, 2008

$

750

4,125,000

4,537,500

On
August 18, 2009, the Company entered into an amendment to the investment agreement with the investor providing for the following:

(a)

The
investor shall invest the remaining
amount of the original investment
agreement at price per share of
$0.12 in monthly installments
of not less than $50 starting
August 1, 2009. The investor may
accelerate such payments at his
discretion.

22

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares warrants and options: (Cont.)

1.

Private placements: (Cont.)

(b)

The
exercise price of
the last 10,083,334
warrants decreased
from an exercise price
of $0.36 per share
to $0.29 per share.

(c)

All
warrants expire on
November 5, 2013 instead
of November 5, 2011.

(d)

The
price per share of
the investment agreement
decreased from $0.1818
to $0.12, therefore
the Company adjusted
the number of Shares
of Common Stock issuable
pursuant the investment
agreement retroactively
and issued to the
investor on October
28, 2009 an additional
9,916,667 shares of
Common Stock for past
investment.

(e)

The
investor has the right
to cease payments
in the event that
the price per share
as of the closing
on five consecutive
trading days shall
decrease to $0.05.

On
January 18, 2011 the Company and an investor signed an agreement to balance amounts due to the investor, totaling $20, against
the remaining balance of the investment. The Company issued to the investor 10,499,999 shares of Common Stock and a warrant to
purchase 4,539,500 shares of the Company's Common Stock at an exercise price of $0.20 per share

As
of March 31, 2011, the Company issued to the investor and its designees an aggregate of 41,666,667 shares of common stock and
a warrant to purchase 10,083,333 shares of the Company's common stock at an exercise price of $0.20 per share and a warrant to
purchase 20,166,667 shares of common stock at an exercise price of $0.29 per share. The warrants may be exercised at any time
and expire on November 5, 2013.

In
addition, the Company agreed to issue an aggregate of 1,250,000 shares of Common Stock to a related party as an introduction fee
for the investment. The shares shall be issued pro rata to the funds received from the investor.

As
of December 31, 2010, the introduction fee was paid in full.

g)

In
January 2010, the Company issued 1,250,000 units to a private
investor for total proceeds of $250. Each unit consists of one
share of Common Stock and a two-year warrant to purchase one
share of Common Stock at $0.50 per share.

h)

In
February 2010, the Company issued 6,000,000 shares of Common
Stock to 3 investors (2,000,000 to each investor) and warrants
to purchase an aggregate of 3,000,000 shares of Common Stock
(1,000,000 to each investor) with an exercise price of $0.5
for aggregate proceeds of $1,500 ($500 each).

i)

On
February 7, 2011, the Company issued 833,333 shares of Common
Stock, at a price of $0.3 per share, and a warrant to purchase
641,026 shares of the Company's Common Stock at an exercise
price of $0.39 per share for one year for total proceeds of
$250.

23

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares warrants and options: (Cont.)

1.

Private placements: (Cont.)

j)

On
February 23, 2011, the Company entered into an investment agreement,
pursuant to which the Company agreed to sell up to 12,815,000
shares of Common Stock, for an aggregate subscription price
of up to $3.6 million and warrants to purchase up to 19,222,500
shares of Common Stock as follows: warrant to purchase 12,815,000
shares of Common Stock at $0.5 for two years, and warrants to
purchase 6,407,500 shares of Common Stock at $0.28 for one year.

In
addition, the Company agreed to pay 10% of the funds received for the distribution services received, out of this amount, 4% was
be paid in stock and the remaining 6% in cash. Accordingly, in March 2011, the company issued 512,600 Common Stock and paid $231.

2.

Share-based compensation to
employees and to directors:

a)

Options to employees and directors:

On
November 25, 2004, the Company's stockholders approved the 2004 Global Stock Option Plan and the Israeli Appendix thereto (which
applies solely to participants who are residents of Israel) and on March 28, 2005, the Company's stockholders approved the 2005
U.S. Stock Option and Incentive Plan, and the reservation of 9,143,462 shares of Common Stock for issuance in the aggregate under
these stock option plans.

Each
option granted under the plans is exercisable until the earlier of ten years from the date of grant of the option or the expiration
dates of the respective option plans. The 2004 and 2005 options plans will expire on November 25, 2014 and March 28, 2015, respectively.
The exercise price of the options granted under the plans may not be less than the nominal value of the shares into which such
options are exercised. The options vest primarily over three or four years. Any options that are canceled or forfeited before
expiration become available for future grants.

On
June 5, 2008, the Company's stockholders approved an amendment and restatement of the Company’s 2004 Global Share Option
Plan and 2005 U.S. Stock Option and Incentive Plan to increase the number of shares of common stock available for issuance under
these stock option plans in the aggregate by 5,000,000 shares.

In
June 2011, the Company's stockholders approved an increase the number of shares of common stock available for issuance under these
stock option plans in the aggregate by 5,000,000 shares.

As
of March 31, 2012, 1,825,103 options are available for future grants.

On
May 27, 2005, the Company granted one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price
of $0.75 per share. The option is fully vested and expires after 10 years.

On
February 6, 2006, the Company entered into an amendment to the Company's option agreement with the Company's former Chief Financial
Officer. The amendment changed the exercise price of the 400,000 options granted to him on February 13, 2005 from $0.75 to $0.15
per share.

24

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

2.

Share-based compensation to
employees and to directors: (Cont.)

a)

Options to employees and directors:
(Cont.)

On
May 2, 2006, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise price
of $0.15 per share. The option is fully vested and expires after 10 years. The compensation related to the option, in the amount
of $48, was recorded as general and administrative expense.

On
June 22, 2006, the Company entered into an amendment to the Company's option agreement with two of its employees. The amendment
changed the exercise price of 270,000 options granted to them from $0.75 to $0.15 per share. The excess of the fair value resulting
from the modification, in the amount of $2, was recorded as general and administration expense over the remaining vesting period
of the options.

On
September 17, 2006, the Company entered into an amendment to the Company's option agreement with one of its directors. The amendment
changed the exercise price of 100,000 options granted to the director from $0.75 to $0.15 per share.

On
March 21, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise
price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to
the option, in the amount of $43, was recorded as general and administrative expense.

On
July 1, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise
price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to
the option, in the amount of $38, was recorded as general and administrative expense. On October 22, 2007, the Company and the
director agreed to cancel and relinquish all the options which were granted on July 1, 2007.

On
July 16, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise
price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to
the option, in the amount of $75, was recorded as general and administrative expense.

On
August 27, 2007, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise
price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to
the option, in the amount of $84, was recorded as general and administrative expense.

On
October 23, 2007, the Company granted to its Chief Executive Officer an option to purchase 1,000,000 shares of Common Stock at
an exercise price of $0.87 per share. The option is fully vested and expires after 10 years. The total compensation related to
the option is $733, which is amortized over the vesting period as general and administrative expense.

25

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

2.

Share-based compensation to
employees and to directors: (Cont.)

a)

Options to employees and directors:
(Cont.)

On
November 5, 2008, the Company entered into an amendment to the Company's option agreement with the Company's Chief Executive Officer.
The amendment changed the exercise price of the 1,000,000 options from $0.87 to $0.15 per share. The compensation related the
modification of the purchase price in the amount of $4 was recorded as general and administrative expense.

On
June 29, 2009, the Company granted to its former Chief Executive Officer and director an option to purchase 1,000,000 shares of
Common Stock at an exercise price of $0.067 per share. The option vests with respect to 1/3 of the shares subject to the option
on each anniversary of the date of grant and expires after 10 years. The total compensation related to the option is $68, which
is amortized over the vesting period as general and administrative expense. In February 2011, the former CEO resigned. On July
25, 2011 the Company signed a settlement agreement with the former CEO under which 483,333 shares out of the above grant became
fully vested exercisable through April 30 2012. An additional $30 was written as compensation in general and administrative expense.

After
the balance sheet date, the former CEO exercised the option to 483,333 shares of Common Stock for an exercise price of $32.

On
June 29, 2009, the Company granted to its former Chief Financial Officer an option to purchase 200,000 shares of Common Stock
at an exercise price of $0.067 per share. The option vested with respect to 1/3 of the shares subject to the option. In connection
with the former Chief Financial Officer’s resignation,2/3
of the above shares were cancelled and the remaining 66,667 are valid through April 7, 2011.

On
August 31, 2009, the Company granted to two of its directors an option to purchase 100,000 shares of Common Stock at an exercise
price of $0.15 per share. Each option vests with respect to 1/3 of the shares subject to the option on each anniversary of the
date of grant and expires after 10 years. The total compensation related to the option is $32, which is amortized over the vesting
period as general and administrative expense.

On
December 13, 2009, the Company granted to one of its directors an option to purchase 100,000 shares of Common Stock at an exercise
price of $0.15 per share. The option is fully vested and is exercisable for a period of 10 years. The compensation related to
the option, in the amount of $21, was recorded as general and administrative expense.

On
February 10, 2010, the Company granted to an employee an option to purchase 30,000 shares of Common Stock at an exercise price
of $0.32 per share. The option vests with respect to 1/3 of the shares subject to the option on each anniversary of the date of
grant and expires after 10 years. The total compensation related to the option is $9, which is amortized over the vesting period
as research and development expense.

26

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

2.

Share-based compensation to
employees and to directors: (Cont.)

a)

Options to employees and directors:
(Cont.)

On
April 13, 2010, the Company, Abraham Israeli and Hadasit Medical Research Services and Development Ltd. (“Hadasit”)
entered into an Agreement (the “Agreement”) pursuant to which Mr. Israeli agreed, during the term of the Agreement,
to serve as (i) the Company’s Clinical Trials Advisor and (ii) a member of the Company’s Board of Directors. In
consideration of the services to be provided by Mr. Israeli to the Company under the Agreement, the Company agreed to grant options
annually during the term of the Agreement for the purchase of its Common Stock, as follows:

·

An
option
for
the
purchase
of 166,666
shares
of Common
Stock
at an
exercise
price
equal
to $0.00005
per
share
to Mr.
Israeli;
and

·

An
option
for
the
purchase
of 33,334
shares
of Common
Stock
at an
exercise
price
equal
to $0.00005
per
share
to Hadasit,

·

* Such
options will vest and become exercisable in twelve (12) consecutive equal monthly amounts.

In
April 2010, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal
to $0.00005 per share. The total compensation related to the option was $50, which is amortized over the vesting period as general
and administrative expense.

On
January 30, 2011 the Company signed an agreement with a new COO and acting CEO. According to the employment agreement, the new
COO received 450,000 options to purchase Common Stock of the Company at $0.20.

On
June 27 2011, the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal
to $0.00005 per share. The total compensation related to the option was $48, which is amortized over the vesting period as general
and administrative expense.

On
June 27 2011, the Company granted to four of its directors an option to purchase 634,999 shares of Common Stock of the Company
at $0.15. The total compensation related to the option was $287, which is amortized over the vesting period as general and administrative
expense.

On
August 10 2011, the Company granted to its CEO, an option to purchase 70,000 shares of Common Stock of the Company at $0.20. The
total compensation related to the option was $26, which was amortized as general and administrative expense.

In the three months ended
March 31 2012, 167,849 options were exercised by former CEO of the Company for $20.

After the balance sheet date,
the Company granted to Mr. Israeli an option to purchase 166,666 shares of Common Stock at an exercise price equal to $0.00005
per share.

27

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

2.

Share-based compensation to
employees and to directors: (Cont.)

b)

Restricted shares to directors
(Cont.):

A
summary of the Company's option activity related to options to employees and directors, and related information is as follows:

For the period ended March 31, 2012

Amount of options

Weighted average exercise price

Aggregate intrinsic value

$

$

Outstanding at beginning of period

4,938,821

0.168

Granted

-

Exercised

167,849

0.150

Reclassified

13,784

0.067

Outstanding at end of period

4,784,756

0.169

807,430

Vested and expected-to-vest at end of period

3,784,617

0.166

627,162

On
May 2, 2006, the Company issued to two of its directors 200,000 restricted shares of common stock (100,000 each). The restrictions
on the shares have fully lapsed. The compensation related to the stocks issued amounted to $104, which was amortized over the
vesting period as general and administrative expenses.

On
April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to a director 100,000 restricted shares of
Common Stock. The restrictions on the shares have fully lapsed. The compensation related to the shares issued amounted to $47,
which was amortized over the vesting period as general and administrative expenses.

In
addition, on April 20, 2007, based on a board resolution dated March 21, 2007, the Company issued to another director 100,000
restricted shares of Common Stock. The restricted shares are not subject to any right to repurchase, and the compensation related
to the shares issued amounted to $47 was recorded as prepaid general and administrative expenses in the three months ended March
31, 2007.

On
August 27, 2008, the Company issued to one of its directors 960,000 shares of Common Stock upon a cashless exercise by a shareholder
of a warrant to purchase 1,000,000 shares of Common Stock at an exercise price of $.01 per share that was acquired by the shareholder
from Ramot. The shares were allocated to the director by the shareholder.

28

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

2.

Share-based compensation to
employees and to directors: (Cont.)

b)

Restricted shares to directors
(Cont.):

In
May 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its directors 300,000 restricted shares
of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant date.

In
May and in June 2010, based on a board resolution dated June 29, 2009, the Company issued to three of its Scientific Advisory
Board members and two of its Advisory Board members 500,000 restricted shares of common stock. The restrictions of the shares
shall lapse in three annual and equal portions commencing with the grant date.

On
April 6, 2010, Prof. Melamed fully exercised his warrant to purchase 1,097,215 shares of the Company’s Common Stock; the
warrant was issued to him pursuant to the agreement with the Consultants effective as of November 4, 2004.

3.

Shares and warrants to investors
and service providers:

The
Company accounts for shares and warrants issued to non-employees using the guidance of ASC 718-10 (formerly "SFAS" 123(R)),
"Accounting for Stock-Based Compensation" and ASC 505-50-30 (formerly "EITF" 96-18), "Accounting for
Equity Instruments that are Issued to Other than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,"
whereby the fair value of such option and warrant grants is determined using a Black-Scholes options pricing model at the earlier
of the date at which the non-employee's performance is completed or a performance commitment is reached.

29

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants and options:
(Cont.)

3.

Shares and warrants to investors and
service providers: (Cont.)

a)

Warrants to investors and
service providers and investors:

Issuance date

Number of warrants issued

Exercised

Forfeited

Outstanding

Exercise Price $

Warrants exercisable

Exercisable through

November 2004

12,800,845

11,761,281

151,803

887,761

0.01

887,761

April 2012

December 2004

1,800,000

1,800,000

-

0.00005

–

-

February 2005

1,894,808

1,894,808

-

2.5

-

-

May 2005

47,500

47,500

-

1.62

-

-

June 2005

30,000

30,000

0.75

30,000

June 2015

August 2005

70,000

70,000

-

0.15

-

-

September 2005

3,000

3,000

-

0.15

-

-

September 2005

36,000

36,000

-

0.75

-

-

September-December 2005

500,000

500,000

-

1

-

-

December 2005

20,000

20,000

-

0.15

-

-

December 2005

457,163

150,000

307,163

0.15

307,163

December 2015

February 2006

230,000

230,000

0.65

230,000

February 2016

February 2006

40,000

40,000

-

1.5

-

February 2006

8,000

8,000

-

0.15

-

February 2006

189,000

97,696

91,304

-

0. 5

-

-

May 2006

50,000

50,000

0.0005

50,000

May 2016

May -December 2006

48,000

48,000

-

0.35

-

-

May -December 2006

48,000

48,000

-

0.75

-

-

May 2006

200,000

200,000

1

200,000

May 2011

June 2006

24,000

24,000

-

0.15

-

-

May 2006

19,355

19,355

-

0.15

-

-

October 2006

630,000

630,000

-

0.3

-

-

December 2006

200,000

200,000

-

0.45

-

-

March 2007

200,000

200,000

-

0.47

-

-

March 2007

500,000

500,000

0.47

500,000

March 2017

March 2007

50,000

50,000

-

0.15

-

-

March 2007

15,000

15,000

-

0.15

-

-

February 2007

50,000

50,000

-

0.45

-

-

March 2007

225,000

225,000

-

0.45

-

-

March 2007

50,000

50,000

-

0.45

-

-

April 2007

33,300

33,300

-

0.45

-

-

May 2007

250,000

250,000

-

0.45

-

-

July 2007

500,000

500,000

0.39

500,000

July 2017

September 2007

500,000

500,000

0.15

500,000

August 2017

August 2007

7,562,500

7,562,500

0.2

7,562,500

November 2013

July 2007

30,000

30,000

-

0.45

-

-

July 2007

100,000

100,000

-

0.45

-

-

October 2007

200,000

200,000

0.15

200,000

August-October 2017

November 2007

2,520,833

2,520,833

0.20

2,520,833

November 2013

November 2007

2,016,667

2,016,667

0.29

2,016,667

November 2013

April 2008

4,537,500

4,537,500

0.29

4,537,500

November 2013

August 2008

3,529,166

3,529,166

0.29

3,529,166

November 2013

August 2008

1,008,334

1,008,334

0.29

1,008,333

November 2013

November 2008

100,000

100,000

0.15

100,000

September 2018

April 2009

200,000

200,000

0.1

200,000

April 2019

October 2009

200,000

100,000

100,000

0.067

66,667

October 2019

October 2009

4,537,500

4,537,500

0.29

4,537,500

November 2013

January 2010

1,250,000

1,250,000

-

0.5

-

-

February 2010

125,000

125,000

-

0.01

-

-

February 2010

3,000,000

3,000,000

-

0.5

-

-

January 2011

4,537,500

4,537,500

0.29

4,537,500

November 2013

February 2011

641,026

641,026

-

0.39

-

-

February 2011

6,407,500

946,834

5,460,666

-

0.28

-

-

February 2011

12,815,000

12,815,000

0.5

12,815,000

February 2013

April 2010

33,334

33,334

0.00005

33,334

April 2020

April 2011

33,334

33,334

33,334

April 2021

February 2010

1,500,000

1,500,000

500,000

February 2020

78,604,165

15,633,811

14,533,762

48,436,590

47,403,257

30

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

3.

Shares and warrants to service
providers: (Cont.)

a)

Warrants: (Cont.)

The
fair value for the warrants to service providers was estimated on the date of grant using a Black-Scholes option pricing model,
with the following weighted-average assumptions for the 3 month activity ended on March 31, 2011; weighted average volatility
of 134%-141%, risk free interest rates of 2.26%-3.47% dividend yields of 0% and a weighted average life of the options of 6-10
years.

b)

Shares:

On
June 1 and June 4, 2004, the Company issued 40,000 and 150,000 shares of Common Stock for 12 months of filing services and legal
and due-diligence services, respectively, with respect to a private placement. Compensation expense related to filing services,
totaling $26, was amortized over a 12-month period. Compensation related to legal services, totaling $105 was recorded as equity
issuance cost and had no effect on the statement of operations.

On
July 1 and September 22, 2004, the Company issued 20,000 and 15,000 shares to a former director for financial services for the
first and second quarters of 2004, respectively. Related compensation in the amount of $39 was recorded as general and administrative
expense.

On
February 10, 2005, the Company signed an agreement with one of its service providers under which the Company issued the service
provider 100,000 restricted shares at a purchase price of $0.00005 par value under the U.S. Stock Option and Incentive Plan of
the Company. All restrictions on these shares have lapsed.

In
March and April 2005, the Company signed an agreement with four members of its Scientific Advisory Board under which the Company
issued to the members of the Scientific Advisory Board 400,000 restricted shares at a purchase price of $0.00005 par value under
the U.S. Stock Option and Incentive Plan (100,000 each). All restrictions on these shares have lapsed.

In
July 2005, the Company issued to its legal advisors 50,000 shares for legal services for 12 months. The compensation related to
the shares in the amount of $37.5 was recorded as general and administrative expense.

In
January 2006, the Company issued to two service providers 350,000 restricted shares at a purchase price of $0.00005 par value
under the U.S. Stock Option and Incentive Plan of the Company. All restrictions on these shares have lapsed. Related compensation
in the amount of $23 was recorded as general and administrative expense.

On
March 6, 2006, the Company issued to its legal advisor 34,904 shares of Common Stock. The shares are in lieu of $18.5 payable
to the legal advisor. Related compensation in the amount of $18.5 was recorded as general and administrative expense.

On
April 13, 2006, the Company issued to service providers 60,000 shares of Common Stock at a purchase price of $0.00005 par value
under the U.S. Stock Option and Incentive Plan of the Company. Related compensation in the amount of $25.8 was recorded as general
and administrative expense.

31

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

On
May 9, 2006, the Company issued to its legal advisor 65,374 shares of Common Stock in lieu of payment for legal services. Related
compensation in the amount of $33 was recorded as general and administrative expense.

32

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

3.

Shares and warrants to service
providers: (Cont.)

b)

Shares: (Cont.)

On
June 7, 2006, the Company issued to a service provider 50,000 shares of Common Stock for filing services for 12 months. Related
compensation in the amount of $24.5 was recorded as general and administrative expense.

On
May 5, 2006, the Company issued 200,000 shares of Common Stock to a finance consultant for his services. Related compensation
in the amount of $102 was recorded as general and administrative expense.

On
August 14, 2006, the Company issued 200,000 shares of Common Stock to a service provider. Related compensation in the amount of
$68 was recorded as general and administrative expense.

On
August 17, 2006, the Company issued 100,000 shares of Common Stock to a service provider. Related compensation in the amount of
$35 was recorded as general and administrative expense.

On
September 17, 2006, the Company issued to its legal advisor 231,851 shares of Common Stock in lieu of $63 payable to the legal
advisor. [Related compensation in the amount of $63 was recorded as general and administrative expense.]

On
April 1 and September 30, 2006, the Company issued to its business development advisor, based on an agreement, 240,000 shares
of Common Stock. Related compensation in the amount of $74 was recorded as general and administrative expense.

On
January 3, 2007, the Company issued to its legal advisor 176,327 shares of Common Stock in lieu of $45 payable to the legal advisor.
Related compensation in the amount of $49 was recorded as general and administrative expense.

On
April 12, 2007, the Company issued to its filing and printing service providers 80,000 shares of Common Stock in lieu of $15 payable
to the service provider. Related compensation in the amount of $30 was recorded as general and administrative expense. In addition,
the Company was obligated to issue the filing and printing service providers additional shares, in the event that the total value
of the shares previously issued (as quoted on the Over-the-Counter Bulletin Board or such other exchange where the Common Stock
is quoted or listed) was less than $0.20 on March 20, 2008. As a result, the Company recorded a liability in the amount of $20.

On
April 12, 2007, the Company issued to its legal advisor 108,511 shares of Common Stock in lieu of $29 payable to the legal advisor.
Related compensation in the amount of $40 was recorded as general and administrative expense.

On
May 18, 2007, the Company issued to its legal advisor 99,257 shares of Common Stock in lieu of $33 payable to the legal advisor.
Related compensation in the amount of $33 was recorded as general and administrative expense.

33

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

3.

Shares and warrants to service
providers: (Cont.)

b)

Shares: (Cont.)

On October
29, 2007, the Company issued to a scientific advisory board member 80,000 shares of the Company’s Common Stock for scientific
services. Compensation of $67 was recorded as research and development expense.

On May
20, 2008, the Company issued to its financial advisor 90,000 shares of the Company's Common Stock. The shares were for $35 payable
to the financial advisor for introduction fee of past convertible loans. Related compensation in the amount of $36 was recorded
as financial expenses.

On April
5, 2009, the Company issued to its Chief Technology Advisor 1,800,000 shares of Common Stock. The shares were for $180 payable
to the advisor. Related compensation in the amount of $144 was recorded as research and development expense.

On June
24, 2009, the Company issued to its public relations advisor 250,000 shares of Common Stock. The shares were for $25 payable to
the advisor. Related compensation in the amount of $18 was recorded as general and administrative expense.

On
July 8, 2009, the Company issued to its financial consultant 285,714 shares of the Company's Common Stock. The shares were for
$20 payable to the financial consultant for valuation of options and warrants. Related compensation in the amount of $20 was recorded
as general and administrative expense.

On July
15, 2009, the Company issued to a service provider 357,142 shares of the Company's Common Stock. The shares were for $25 payable
to the service provider for filing services. Related compensation in the amount of $21 was recorded as general and administrative
expense.

On August
10, 2009, the Company issued to a service provider 71,428 shares of the Company's Common Stock. The shares were for $5 payable
to the service provider for IT services. Related compensation in the amount of $4 was recorded as general and administrative expense.

On January
5, 2010, the Company issued to its public relations advisor 50,000 shares of the Company's Common Stock for six months service.
The issuance of the shares is part of the agreement with the public relations advisor that entitled them to a monthly grant of
8,333 shares of the Company's Common Stock. Related compensation in the amount of $12 was recorded as general and administrative
expense.

On January
6, 2010, the Company issued to a service provider 60,000 shares of the Company's Common Stock. The shares were for $15 payable
to the service provider for insurance and risk management consulting and agency services for three years. Related compensation
in the amount of $16 was recorded as general and administrative expense.

On March
5, 2007, the Company issued a $150 Convertible Promissory Note to a third party. Interest on the note accrued at the rate of 8%
per annum for the first year and 10% per annum after the first year. On January 27, 2010, the third party converted the entire
accrued principle and interest outstanding under the note, amounting to $189, into 1,016,109 shares of Common Stock.

34

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 8 -

STOCK CAPITAL (Cont.)

B.

Issuance of shares, warrants
and options: (Cont.)

3.

Shares and warrants to service
providers: (Cont.)

b)

Shares: (Cont.)

On December
13, 2009, the Company issued a $135 Convertible Promissory Note to it legal advisor for $217 in legal fees accrued through October
31, 2009. Interest on the note accrued at the rate of 4%. On February 19, 2010, the Company’s legal advisor converted the
entire accrued principal and interest of outstanding under the note into 402,385 shares of Common Stock.

In May
2010, based on a board resolution dated June 29, 2009 the Company issued to one of its public relations advisors 100,000 restricted
shares of Common Stock. The restrictions of the shares shall lapse in three annual and equal portions commencing with the grant
date.

On December
16, 2010, the Company issued to a service provider 83,333 shares of the Company's Common Stock. The shares were for public relations
services. Related compensation in the amount of $40 is recorded as general and administrative expense.

On December
16, 2010, the Company granted to its Chief Medical Advisor 900,000 shares of the Company's Common Stock for services rendered
through December 31 2010. Related compensation in the amount of $180 is recorded as research and development expense (see Note
5B).

On December
16, 2010 the Company granted to its Chief Scientist 200,000 shares of the Company's Common Stock for services rendered through
December 31 2010. Related compensation in the amount of $40 is recorded as research and development expense (see Note 5B).

On
February 16, 2011 one of the Company's consultants exercised 100,000 warrants to Common Stock for $33.

On February
18, 2011, the Company's legal advisor converted the entire accrued principal and interest of the Convertible Promissory Note granted
on September 15, 2010, totaling $137, into 445,617 shares of Common Stock.

The total
stock-based compensation expense, related to shares, options and warrants granted to employee’s directors and service providers,
was comprised, at each period, as follows:

Three months ended March 31

Period from September 22, 2000
(inception date)
through March 31,

2012

2011

2012

Unaudited

Unaudited

Research and development

13

9

17,556

General and administrative

168

-2

10,281

Financial expenses, net

-

-

248

Total stock-based compensation expense

181

7

28,098

35

BRAINSTORM CELL
THERAPEUTICS INC. AND SUBSIDIARY

(A development stage
company)

Notes to the
financial statements

NOTE 9 -

SUBSEQUENT EVENTS

A.

In April 2012, the former
CEO exercised 1,014,757 options to shares of Common Stock
of the Company. An exercise fee of $112 was paid to the Company.
(See note 8 B 2 (a))

B.

In April 2012, the Company
granted to Mr. Israeli an option to purchase 166,666 shares
of Common Stock at an exercise price equal to $0.00005 per
share. (See note 8 B 2 (a))

C.

In April 2012, the Company
granted to Hadasit a warrant to purchase 33,334 shares of
Common Stock at an exercise price equal to $0.00005 per share.
(See note 8 B 2 (a))

36

Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS

This quarterly report contains numerous statements, descriptions,
forecasts and projections, regarding Brainstorm Cell Therapeutics Inc. and its potential future business operations and performance.
These statements, descriptions, forecasts and projections constitute “forward-looking statements,” and as such involve
known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance and
achievements to be materially different from any results, levels of activity, performance and achievements expressed or implied
by any such “forward-looking statements.” Some of these are described under “Risk Factors” in this report
and in our annual report on Form 10-K for the fiscal year ended December 31, 2011. In some cases you can identify such “forward-looking
statements” by the use of words like “may,” “will,” “should,” “could,” “expects,”
“hopes,” “anticipates,” “believes,” “intends,” “plans,” “estimates,”
“predicts,” “likely,” “potential,” or “continue” or the negative of any of these
terms or similar words. These “forward-looking statements” are based on certain assumptions that we have made as of
the date hereof. To the extent these assumptions are not valid, the associated “forward-looking statements” and projections
will not be correct. Although we believe that the expectations reflected in these “forward-looking statements” are
reasonable, we cannot guarantee any future results, levels of activity, performance or achievements. It is routine for our internal
projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood
that the internal projections and beliefs upon which we base our expectations may change prior to the end of each quarter or the
year. Although these expectations may change, we may not inform you if they do and we undertake no obligation to do so. We caution
investors that our business and financial performance are subject to substantial risks and uncertainties. In evaluating our business,
prospective investors should carefully consider the information set forth under the caption “Risk Factors” in addition
to the other information set forth herein and elsewhere in our other public filings with the Securities and Exchange Commission.

Company Overview

Brainstorm Cell Therapeutics Inc. (“Brainstorm”
or the “Company”) is a biotechnology company developing innovative adults stem cell therapies for highly debilitating
neurodegenerative disorders such as Amyotrophic Lateral Sclerosis (ALS, also known as Lou Gehrig's disease), Multiple Sclerosis,
and Parkinson’s disease (PD). These devastating diseases have limited treatment options and as such represent highly unmet
medical needs.

BrainStorm’s proprietary process for propagation of Mesenchymal
Stem Cells (MSC), and their differentiation into NeuroTrophic factor-(NTF) secreting cells (MSC-NTF), and their transplantation
at, or near, the site of damage, offers the hope of repairing degenerated tissues and curing the underlying pathology, rather than
simply treating its symptoms.

BrainStorm’s approach has a high safety profile based
on its use of autologous cells, which are free of the risk of rejection, tumor formation, controversy or ethical issues.

Our core technology was developed in collaboration with prominent
neurologist Prof. Eldad Melamed, former head of Neurology of the Rabin Medical Center and member of the Scientific Committee of
the Michael J. Fox Foundation for Parkinson's Research, and expert cell biologist Prof. Daniel Offen of the Felsenstein Medical
Research Center of Tel Aviv University.

The Company holds exclusive worldwide rights to commercialize
the technology, through a licensing agreement with Ramot, the technology transfer company of Tel Aviv University, Israel.

37

As a result of limited cash resources and the desire to take
a faster path to clinical trials, since the fourth quarter of 2008 the Company has focused all of its efforts on ALS. However,
the company intends to begin pre-clinical testing of Multiple Sclerosis during 2012.

In February 2011, the U.S. Food and Drug Administration (“FDA”)
granted Orphan Drug designation to NurOwn, the Company’s autologous adult stem cell product candidate for the treatment of
ALS. Orphan Drug status entitles BrainStorm to seven years of marketing exclusivity for NurOwn upon regulatory approval, as well
as the opportunity to apply for grant funding from the US government of up to $400,000 per year for four years to defray costs
of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA's application user
fee.

In June 2011, BrainStorm initiated a Phase I/II clinical trial
for the treatment of ALS with NurOwn at the Hadassah University Medical Center’s in Jerusalem, after receiving approval from
the Israeli Ministry of Health (“MoH”). BrainStorm is the first company to receive clearance from the MoH to carry
out a differentiated stem-cell based therapeutic clinical trial in Israel. The Company’s production process for manufacturing
clinical grade MSC-NTF cells is in full compliance with Good Manufacturing Practice (“GMP”) requirements.

In January 2012, BrainStorm announced interim results of its
Phase I/II clinical trial. The one month follow-up of the first four ALS patients treated with the Company's NurOwn therapy indicated
that the therapy was safe, did not cause any adverse side effects, and showed some initial positive clinical indications.

Our efforts are currently directed at:

·

Completing a Phase I/II clinical trial in Israel;

·

Initiating a Phase II clinical trial in the USA;

·

Initiating pre-clinical studies on Multiple Sclerosis; and

·

Submitting an IND to the FDA.

Our Approach

The Company's approach to treatment of neurodegenerative diseases
with autologous adult stem cells includes a multi-step process beginning with harvesting of undifferentiated stem cells from the
patient's own bone marrow, and concluding with transplantation of differentiated, neurotrophic factor-secreting mesenchymal stem
cells (MSC-NTF) into the same patient – intrathecally (IT) and/or intramuscularly (IM). This approach is based on pre-clinical
data documented by our research team, led by Prof. Melamed and Prof. Offen.

Melamed and Offen's group has shown that human bone marrow mesenchymal
stem cells can be expanded and induced to differentiate into two types of brain cells, neuron-like and astrocyte-like, each having
different therapeutic potential, as follows:

In-vitro differentiation of the expanded human bone marrow derived
mesenchymal stem cells in a proprietary medium led to the generation of neurotrophic-factors secreting cells. The in-vitro differentiated
cells were shown to express and secrete GDNF, as well as other NTFs, into the growth medium. GDNF is a neurotrophic-factor, previously
shown to protect, preserve and even restore neuronal function, particularly dopaminergic cells in PD, but also neuron function
in other neurodegenerative pathologies such as ALS and Huntington’s disease. Unfortunately, therapeutic application of GDNF
is hampered by its poor brain penetration and stability. Attempting to infuse the protein directly to the brain is impractical
and the alternative, using GDNF gene therapy, suffers from the limitations and risks of using viral vectors. Our preliminary results
show that our NTF secreting cells, when transplanted into a 6-OHDA lesion PD rat model, show significant efficacy. Within weeks
of the transplantation, there was an improvement of more than 50% in the animals’ characteristic disease symptoms.

38

We have optimized the proprietary processes for induction of
differentiation of human bone marrow derived mesenchymal stem cells into differentiated cells that produce NTF (MSC-NTF). The
optimization and process development is conducted in Good Manufacturing Practice (“GMP”) compliance.

NurOwn program one (current) – Based on the above
pre-clinical results, the Company initiated a Phase I/II clinical trial at the Hadassah Medical Center in June 2011 for treatment
of ALS patients with MSC-NTF cells. An interim report of this ongoing clinical trial will be submitted to the Ministry of Health
in Q3 2012.

NurOwn program two (future) – Based on positive
proof-of-concept results with MSC-NTF cells for Multiple Sclerosis (MS), the Company plans to initiate a pre-clinical study for
this disease in Q2 2012.

Our approach comprises the following steps:

·

Bone marrow aspiration from patient;

·

Isolation and expansion of the mesenchymal stem cells;

·

Differentiation of the expanded stem cells into neurotrophic-factor secreting (MSC-NTF) cells; and

·

Autologous transplantation into the patient at the site of damage.

Results of Operations

The Company has been a development stage company since its inception.
For the period from inception (September 22, 2000) until March 31, 2012, the Company has not generated any revenues from operations.
The Company does not expect to generate revenues from operations until 2014 at the earliest. In addition, the Company has incurred
operating costs and other expenses of approximately $879,000 during the three months ended March 31, 2012, and approximately $42,301,000
for the period from inception (September 22, 2000) until March 31, 2012. Operating expenses incurred since inception were approximately
$17,513,000 for general and administrative expenses and $24,788,000 for research and development costs.

Research and Development, net:

Research and development expenses, net for the three months
ended March 31, 2012 and 2011 were $369,000 and $270,000, respectively. In addition, our grant from The Office of the Chief Scientist
increased by $140,000 to $240,000 for the three months ended March 31, 2012 from $100,000 for the three months ended March 31,
2011.

The increase in research and development expenses for the three
months ended March 31, 2012 is primarily due to: (i) in June 2011, the Company began clinical trials in ALS patients, in Hadassah,
under which the Company paid $340,000 in the three months ended March 31, 2012; (ii) an increase of $65,000 in payroll costs due
to recruitment of four additional employees to conduct the clinical trials.

General and Administrative:

General and administrative expenses for the three months ended
March 31, 2012 and 2011 were $510,000 and $258,000, respectively.

The increase in general and administrative expenses for the
three month period ended March 31, 2012 from the three month period ended March 31, 2011 is primarily due to: (i) an increase
of $170,000 in compensation expenses for stock granted to directors and employees; (ii) an increase of $70,000 in legal, audit
and public relations activity.

39

Financial Expenses:

Financial income for the three months ended March 31, 2012 was
$11,000, compared to a financial expense of $177,000 for the three months ended March 31, 2011.

The financial income for the three months ended March 31, 2012
is mainly from conversion exchange rate and income on deposits in banks. The financial expense for the three months ended March
31, 2011 is primarily attributable to $192,000 financial expense from conversion of debt to a subcontractor to our common stock,
balanced by financial income of $15,000 due to the conversion exchange rate.

Net Loss:

Net loss for the three months ended on March 31, 2012 was $872,000,
as compared to a net loss of $705,000 for the three months ended March 31, 2011. Net loss per share for the three months ended
March 31, 2012 was $0.01, as it also was for the three months ended March 31, 2011.

The weighted average number of shares of common stock used in
computing basic and diluted net loss per share for the three months ended March 31, 2012 was 126,591,262, compared to 108,895,199
for the three months ended March 31, 2011.

The increase in the weighted average number of shares of common
stock used in computing basic and diluted net loss per share for the three months ended March 31, 2012 was due to (i) the
issuance of shares in a private placement, (ii) the exercise of options and warrants and (iii) the issuance of shares to service
providers.

Liquidity and Capital Resources

The Company has financed its operations since inception primarily
through private sales of its common stock and warrants and the issuance of convertible promissory notes. At March 31, 2012, we
had $1,775,000 in total current assets and $1,290,000 in total current liabilities.

Net cash used in operating activities was $746,000 for the three
months ended March 31, 2012. Cash used for operating activities in the three months ended March 31, 2012 was primarily attributed
to clinical trial costs, payroll costs, rent, outside legal and audit fee expenses and public relations expenses.

Net cash used in investing activities was $52,000 for the three
months ended March 31, 2012.

Net cash provided by financing activities was $20,000 for the
three months ended March 31, 2012 is primarily attributable to exercise of options to common stock.

Our material cash needs for the next 12 months include the payments
due under an agreement with Hadassah to conduct clinical trials in ALS patients, under which we must pay to Hadassah an amount
of (i) up to $32,225 per patient (up to $773,400 in the aggregate) and (ii) $65,000 per month for rent and operation of the
GMP facilities in anticipation of Hadassah's clinical trials.

Our other material cash needs for the next 12 months will include
payments of (i) employee salaries, (ii) patents, (iii) construction fees for facilities to be used in our research and development
and (iv) fees to our consultants and legal advisors.

We will need to raise substantial additional capital in order
to meet our anticipated expenses. If we are not able to raise substantial additional capital, we may not be able to continue to
function as a going concern and we may have to cease operations. Even if we obtain funding sufficient to continue functioning as
a going concern, we will be required to raise a substantial amount of capital in the future in order to reach profitability and
to complete the commercialization of our products. Our ability to fund these future capital requirements will depend on many factors,
including the following:

40

·

our ability to obtain funding from third parties, including any future collaborative partners;

·

the scope, rate of progress and cost of our clinical trials and other research and development
programs;

·

the time and costs required to gain regulatory approvals;

·

the terms and timing of any collaborative, licensing and other arrangements that we may establish;

Our discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally
accepted in the U.S. The preparation of these financial statements requires us to make judgments, estimates, and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements as well as the reported revenue and expenses during the reporting periods. We continually evaluate our judgments,
estimates and assumptions. We base our estimates on the terms of underlying agreements, our expected course of development, historical
experience and other factors we believe are reasonable based on the circumstances, the results of which form our management’s
basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.

There were no significant changes to our critical accounting
policies during the quarter ended March 31, 2012. For information about critical accounting policies, see the discussion of critical
accounting policies in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Off Balance Sheet Arrangements

We have no off balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures, or capital resources.

Item 3. Quantitative and Qualitative Disclosures About Market
Risk.

This information has been
omitted as the Company qualifies as a smaller reporting company.

41

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report,
we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as a result of the material weakness in our internal control over financial reporting
described below, our disclosure controls and procedures were not effective, as of the end of the period covered by this report,
to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and
that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

Management identified the following
material weakness in its assessment of the effectiveness of internal control over financial reporting as of December 31, 2011,
which continued to exist as of March 31, 2012:

·

The Company did not maintain effective controls over certain aspects of the financial reporting process because we lacked a
sufficient complement of personnel with a level of accounting expertise and an adequate supervisory review structure that is commensurate
with the Company’s financial reporting requirements.

Nevertheless, based on a number of factors, including the performance
of additional procedures performed by management designed to ensure the reliability of our financial reporting, our Chief Executive
Officer and Chief Financial Officer believe that the consolidated financial statements included with this quarterly report fairly
present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for the periods,
presented, in conformity with U.S. GAAP.

Management’s Remediation Initiatives

We plan to develop policies and procedures for training of personnel
or external advisers to verify that we have a sufficient number of personnel with knowledge, experience and training in the application
of generally accepted accounting principles commensurate with our financial reporting and U.S. GAAP requirements. Where necessary,
we will supplement personnel with qualified external advisors. Additionally, where appropriate, we plan to identify training courses
on accounting principles and procedures that would benefit our accounting and finance personnel.

Changes in Internal ControlOver Financial Reporting

There have been no changes in our internal controls over financial
reporting that occurred during the quarter ended March 31, 2012 that materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings.

For a description of legal proceedings affecting the Company
refer to Part I, Item 3, “Legal Proceedings” of our Annual Report on Form 10-K for the fiscal year ended December 31,
2011. There were no additional material developments to the legal proceedings affecting the Company in the fiscal quarter ended
March 31, 2012.

42

From time to time, we may become involved in litigation relating
to claims arising out of operations in the normal course of business, which we consider routine and incidental to our business.
We currently are not a party to any material legal proceedings, other than as described in Part I, Item 3, “Legal Proceedings”
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, the adverse outcome of which, in management’s
opinion, would have a material adverse effect on our business, results of operation or financial condition.

Item 1A. Risk Factors.

There have not been any material changes from the risk factors
previously disclosed in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December
31, 2011. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the
risk factors discussed below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which could materially
affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K for the fiscal
year ended December 31, 2011 are not the only risks we face. Additional risks and uncertainties not currently known to us or that
we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.

On April 13, 2012, pursuant to the Hadasit Agreement, we issued
a warrant to purchase up to 33,334 shares of our common stock at an exercise price of $0.00005 per share, exercisable for a period
of 10 years, to Hadasit Medical Research Services and Development Ltd. The issuance of these securities was effected without registration
in reliance upon Regulation D promulgated under the Securities Act. No underwriters were involved with the issuance
of such securities and no commissions were paid in connection with such transactions.

On April 22, 2012, we issued 834,729 shares of our common
stock to Yossef Levy in connection with his exercise of a warrant to purchase common stock previously issued. The
exercise price paid upon exercise of the warrant was $0.01 per share for a total of $8,347, which has been received by
us. The issuance of these securities was effected without registration in reliance on Section 4(2) of the Securities
Act as a sale by the Company not involving a public offering. No underwriters were involved with the issuance of such securities.

Item 5. Other Information.

On May 10, 2012, the Company entered into a Warrant Amendment
Agreement (the “Amendment”) with ACCBT Corp. (the “Investor”), a company under the control of Mr. Chaim
Lebovits, the President of the Company, pursuant to which the Company and the Investor agreed to amend each warrant previously
issued by the Company to the Investor.

Pursuant to the Amendment, upon effectiveness of a six month
lock-up agreement entered into by the Investor in connection with a proposed offering of common stock by the Company, the then
current expiration date for each warrant held by the Investor shall be automatically extended by an additional 18 months. If the
proposed offering is not completed by October 31, 2012, the Amendment will automatically terminate and be of no further force or
effect.

As previously disclosed, pursuant to the terms of a certain
Subscription Agreement, the Company agreed to sell to the Investor up to 27,500,000 shares (the “Subscription Shares”)
of the Company’s common stock for an aggregate subscription price of up to $5.0 million and for no additional consideration,
if the Investor purchased the Subscription Shares, warrants to purchase up to 30,250,000 shares of common stock . Per the terms
of the Subscription Agreement, as amended to date, the current expiration date for each warrant held by the Investor is November
5, 2013.

The foregoing description is subject to, and qualified in its
entirety by, the Amendment filed as an exhibit hereto and incorporated herein by reference.

During the quarter ended March 31, 2012, we made no material
changes to the procedures by which stockholders may recommend nominees to our Board of Directors, as described in our most recent
proxy statement.

Item 6. Exhibits.

The Exhibits listed in the Exhibit Index immediately preceding
such Exhibits are filed with or incorporated by reference in this report.

43

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

BRAINSTORM CELL THERAPEUTICS INC.

May 11, 2012

By:

/s/ Adrian Harel

Name: Adrian Harel

Title: Acting Chief Executive Officer (Principal Executive Officer)

May 11, 2012

By:

/s/ Liat Sossover

Name: Liat Sossover

Title: Chief Financial Officer (Principal Financial Officer)

44

EXHIBIT INDEX

Exhibit Number

Description

10.1

Warrant Amendment Agreement, dated as of May 10, 2012, by and between Brainstorm Cell Therapeutics Inc. and ACCBT Corp.

31.1

Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Label Linkbase Document

101.PRE*

XBRL Taxonomy Presentation Linkbase Document

*

Pursuant to Rule 406T of Regulation S-T, the interactive files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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